Datasonic Group Bhd (Trading Buy)

• DSONIC is a provider of security-based Information and Communications Technology (ICT) solutions, supplying customised smart cards and machine-readable passports (including MyKad and Malaysian passports).

• Given its business expertise and experience, DSONIC is in a position to participate in Malaysia’s master plan to transform into a digital economy by 2030.

• Meanwhile, after getting hit by the Covid-19 impact in the first quarter, the Group is on a gradual earnings recovery with bottomline coming in at RM7.5m (+58% QoQ) in the second quarter ended Sep 2020, taking its first half net profit to RM12.3m (-56% YoY).

• On the chart, after swinging sideways since early September last year, the stock could break out from its consolidation pattern following the recent share price crossover of the 50-day SMA line.

• And with the momentum indicator rising after cutting above the zero level, DSONIC shares will probably find renewed strength to climb towards our resistance thresholds of RM0.62 (R1; 18% upside potential) and RM0.70 (R2; 33% upside potential).

• We have placed our stop loss price at RM0.45 (or 14% downside risk).

GHL Systems Bhd (Trading Buy)

• GHLSYS is a leading ASEAN payment services provider with key operations in Malaysia, Philippines, Thailand, Indonesia, Cambodia and Australia. The Group provides world-class payment services comprising physical, internet and mobile payments, managing more than 397,500 footprint of payment touchpoints across its ASEAN markets that enable credit card, debit card, ewallets, contactless payment, loyalty, prepaid credit top up and bill collection payment services.

• The Group’s profit has been growing from year to year between FY15 and FY19, up from RM10.3m to RM28.7m over the four years, which represents a CAGR of 29.1%.

• However, its earnings momentum was disrupted by the Covid-19 outbreak when the nine-month result ended Sep 2020 fell 64% YoY to RM7.5m. Positive though was the strong recovery posted in 3QFY20, which saw its bottomline coming in at RM12.1m (versus 2QFY20’s net loss of RM5.9m and 3QFY19’s net profit of RM7.3m).

• Additionally, the Group’s balance sheet is healthy with net cash holdings & other short-term investments standing at RM172.2m (or 15.1 sen per share) as of end-Sep 2020.

• On the chart, GHLSYS shares may attempt to climb out of an existing rectangle pattern. With the price uptrend supported by its 100-day SMA line and the recent crossing of the DMI Plus over the DMI Minus indicating an upward bias, a probable breakaway could push the stock to test our resistance targets of RM2.04 (R1; 13% upside potential) and RM2.17 (R2; 21% upside potential).

• Our stop loss price is set at RM1.58 (or 12% downside risk from the last traded price of RM1.80).

Source: Kenanga Research - 24 Feb 2021